HERE'S THE INFORMATION I GET FROM THE S-3 FILING...
The company is filing this now because of SEC guidelines to register shares that could be converted beginning on Nov. 5, 1997.
The Notes(bonds) were sold in August of 1997. The total amount was $172,500,000.
The Yield on the Bonds are 3.5% through August 5, 2000 and then move to 7.25% from August 6, 2000 until maturity in 2004. The total effective yield is 5.4%. This is a great yield and was made possible because of the companies positive outlook and financial condition. (No one knew about the conference pull-out about to occur :-)
The offering (notes/bonds) were sold by Morgan Stanley & Co. and Montgomery Securities. State Street Bank and Trust Company is the Trustee (manage the notes/conversion etc..). The Notes were issued to a SMALL NUMBER OF INSTITUTIONAL BUYERS. The notes are designated for trading on the PORTAL system of the NASD. (Don't know what that is?). Notes sold after the offering are not expected to trade on the PORTAL system.
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The Notes are convertible beginning Nov. 5 1997 at $47 per share (21.2766 shares per $1000 note).
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The semi-annual payments begin Feb. 6 and Aug. 8 1998. ($172,500,000 x 3.25% = $5,606,250 / 2 = $2,803,125 per semi-annual payment.
The company can redeem the notes but no soon than Aug. 9, 2000. They would need to pay 106% of the principal remaining. The percentage decreases as the expiration nears etc..
The company can lower the conversion price for any period of at least 20 days, in which the company will give 15 days NOTICE OF SUCH REDUCTION. The board of directors would make this determination and I would assume that the only reason to do so was to allow people to convert because you didn't have the interest payment in the bank. (Not an issue for CYMI).
The only way I can see the price being converted for less than $47 per share is if..
a) The Board of Directors choose to do so, of which they would need to give the public 15 days notice of such decision.
b) The company had a "Fundamental Change" meaning more stock was issued, a merger, bankruptcy, consolidation, liquidation etc... (No Fundamental Change has occured).
The $24.375 conversion price is NOT THE CONVERSION PRICE TO THE BEST OF MY UNDERSTANDING. The company is STILL in the same fundemental position they were before, regardless of stock price.
The Notes/Bonds may be sold to other individuals but the price of the conversion REMAINS THE SAME ($47). The price (par value) of the note/bond will fluctuate with the price of the stock. If the price of the stock moves up the par value of the note/bond goes up. Someone selling a Note right now would receive less than $1000 because the stock is considerable lower than the coversion price.
Personal Opinion: A few institutional investors purchased notes because it gave them an option to buy $172,500,000 worth of CYMER without moving the price of the stock up, and it gave them interest on their investment. It was better than purchasing shares outright because the worst case senario is you get interest and hold the note for a few years and make a profit on the conversion (Long-term investors).
P.S. The company says they can go to as low as .10 microns by using different gas combinations and advanced optical and photomask technologies. :-))
Some S-3 filings will state the offering amount and date of conversion but won't mention a FIXED CONVERSION PRICE. That's the trick because the buyers will short the hell out of the stock to get more shares on the note. Then they'll turn around and cover with the shares given to them by the company when converted. Once that's done they'll ride it back up with new shares purchased. CYMER USED A FIXED PRICE OF $47 PER SHARE. :-)
I'm still in the financial community but I don't recommend individual stocks to clients. I trade for my personal enjoyment.
I'd love to hear more on this matter so we can put it to rest. Comments???
Aloha |
